The latest edition of the Investment Management Association annual survey shows 2013 was another ground-breaking year for UK-domiciled authorised funds as assets under management reached £770bn. Retail funds make up about two thirds of this total. This growth continued into 2014 with assets increasing to £806bn by July including a further £14bn of flows into retail funds.
There is a clear appetite among investors for yield since 2008, and an ongoing interest in asset allocation and outcome-focused approaches, such as targeted absolute return and risk-targeted funds.
Equity income sales in 2013 were far stronger than fixed income which saw a small outflow, marking the end of a four year-period of exceptionally strong sales. For the year to July net retail sales of equity income funds were almost six times greater than flows into fixed income funds and higher than all of 2013. Equity growth funds saw the highest inflows since the end of the dot.com boom, though these fell back somewhat in the year to July as investors seemed to favour equity income products.
This highlights the greater diversity of managed assets. Where equity funds accounted for close to 90 per cent of funds under management two decades ago, they now represent around 55 per cent.
Over 80 per cent of retail flows are now being directed into lower charging classes. Whilst transparency has increased, so has complexity, for example via a greater range of share classes. UK fund managers also observe that while advice may have improved in quality post-RDR, access to it is has become harder, which may lead to an increase in non-advised sales.
This is all taking place at a time of greater regulatory and political scrutiny of both UK fund managers and the broader asset management industry. While the overall message of the survey is the industry is in good shape, significant challenges and opportunities lie ahead.
Ruth Meade is a senior research analyst at the IMA